FORT LAUDERDALE: When war comes down to boots on the ground, the Army’s greatest asset is its people. But in fiscal terms people are also its greatest liability. And now some procedural peculiarities of the automatic spending cuts known as sequestration, set to start on Friday, will make personnel costs much harder to handle in ways that could erode readiness, retention, and morale.

Manpower costs dominate the Army budget, dwarfing all other expenses, from training to equipping to running bases, as the official graphic above makes clear. (Click on the image to see it full-size). Army spending on manpower soared 54 percent from 2000 to 2013 — but the number of soldiers is only 4 percent higher. Base pay has risen by over 50 percent, set-asides for retirement pay by over 65 percent, housing allowances are up over 300 percent.

“The soldiers deserve the pay,” said Maj. Gen. Thomas Spoehr, director of program analysis and evaluation on the resource planning section (G-8) of the Army’s Pentagon staff, during his briefing (from which the slide and data cited above is drawn) last week to the Association of the US Army’s annual winter conference in Florida. “But this is why it’d be very difficult to return to a similar-sized Army with the amount of money we had in 2000.”

Skeptics who charge that military leaders are crying wolf over sequestration point out the automatic cuts would only return Pentagon spending to the level it was at (adjusting for inflation) in 2007, a year before the Army’s budget peaked. But Spoehr said that dropping down to 2007 levels so precipitously — the Army would lose 53 percent of its “total obligation authority” overnight, he calculated — would be disruptive, inefficient, and unmanageable for even “the most nimble of organizations,” which the Army notoriously is not. What’s more, he argued, the Army’s cost structure has changed since 2007 in ways which sequestration’s perverse design would make particularly hard to manage.

As written in current law, the sequester is a one-two punch — or rather a one-to-10 punch, since if allowed to take full effect (which is politically unlikely), it would cut federal spending over 10 years using two different mechanisms.

In fiscal year 2013, the sequester is particularly paradoxical. Sequestration would lower 2013 spending by roughly $90 billion, half from defense programs and half from non-defense, by cutting every line item equally — with two huge exceptions. On the civilian side, Social Security and other entitlements would be untouched. On the defense side, military personnel accounts are exempt.

Yet pay and benefits are the military’s most rapidly rising expense, particularly in the Army, the largest and most labor-intensive service. The military personnel account alone eats up 42 percent of the 2013 Army budget request, more than any other category of spending. (That figure is really understated, since key personnel-related expenses, from healthcare to daycare, are actually covered under the “operations and maintenance” account, not “personnel”). The bottom line: In 2013, the federal government as a whole has to cover the sequestration bill without cutting its biggest expense, entitlements, and the Army in particular has to cover its share of that bill without cutting its biggest expense, personnel.

By contrast, for 2014 and every subsequent year of sequestration through 2022 — for which the Army’s already starting to plan — budgeteers can come up with the required savings however they want. Army Chief of Staff Ray Odierno has said bluntly that personnel accounts will pay the price. “For fiscal year ’14 and beyond,” Gen. Odierno told the Senate Armed Services Committee on Feb. 12th, “sequestration will result in the loss of at least an additional 100,000 personnel — soldiers — from the active Army, the Army National Guard and the US Army Reserve.”

The combined result of the two different kinds of cuts? Since the Army can’t touch personnel in fiscal 2013, which is already half over (the federal fiscal year starts October 1st), it must scramble to save money by cancelling maintenance and training. In 2014, however, the axe will fall heavily on manpower. It will fall suddenly, too, because sequestration takes the same bite out of every annual budget for a decade, with no leeway to phase cuts in over time.

The Army was already coming down from a wartime high of 570,000 troops to 490,000, but service leaders fought hard and successfully for a steady, carefully planned decline in personnel through 2017. There was also adequate operations funding in the plan for those troops to stay well-trained. Army leaders accepted a drawdown, but they were desperate not to repeat either the precipitous, demoralizing reductions in force of the 1990s — which cost the service many promising young officers — or the training and discipline shortfalls of the “hollow Army” in the 1970s — a formative trauma for today’s top generals.

“I began my career in a hollow Army; I am determined not to end my career in a hollow Army,” Odierno told the Senate.

But that would be far from easy even without sequestration. “As we look at history, it has been very difficult to avoid hollowing out the force” in the first few years of a drawdown, Spoehr said. As budgets shrink, the Army can cut back on training and maintenance almost immediately but takes longer to get rid of people. Fewer training and maintenance dollars for the same size force means less training time and less functioning gear per soldier: a hollow force. The current crisis just aggravates that mismatch by forcing the Army to stay the same size and take almost all the cuts from maintenance and training, with ugly implications for on both readiness and morale.

The post-9/11 generation of young soldiers is highly motivated and accustomed to intensive, realistic training. They will have little patience with marking time on base because the Army can’t afford to fix their gear or send them out on exercises. “They have very high expectations,” said Gen. Robert Cone, chief of the Army Training and Doctrine Command (TRADOC), at the opening of the AUSA conference. “Cutting the near-term readiness too greatly will create an exodus.”

Civilian Workforce: Affected Immediately

Sequestration’s peculiar treatment of personnel costs, it must be made clear, applies only to uniformed military personnel. The Defense Department’s plainclothes legions of civilian workers are paid out of other accounts that are not protected from 2013 sequestration. With payroll accounts cut by nine percent, mandatory unpaid leave called furloughs would likely start in 30 days after sequestration takes effect. (Actual layoffs are unlikely because terminating an employee actually costs more money than it saves for the first year).

So for 22 weeks, almost every federal civilian will stay home one day a week. That has near-term impacts on everything from repairing weapons to renegotiating contracts. It has less quantifiable long-term impacts on the health of the workforce.

“The greatest risk for me as a commander is losing this critical workforce we’ve developed,” said Gen. Dennis Via, chief of the Army Materiel Command, at the AUSA conference.

The stereotype of a Defense Department civilian is some paper-pusher in the Pentagon, but most civilians work well outside the Beltway, and they work with their hands. In some cases they are “second- and third-generation artisans” with skills not found in the private sector, Via said. One Army installation under Via’s command has a machine for testing the tubes for artillery pieces, but, he said, the civilian worker can make the assessment by ear. “He tests it by listening,” Via said. “He’s been doing that for 30, 40 years, and his father did it before him.”

“The thing we’ve always prided ourselves on is taking care of our people,” said Maj. Gen. Lynn Collyar, chief of Army Aviation and Missile Command (AMCOM), at the AUSA conference. “This is going to hurt our ability to do that.”

“Right now there’s anxiety because there’s no decisions,” Collyar told Breaking Defense after his public remarks. “You don’t now what the outcome is, and all you can see and hear is rumors.”

Army leaders are spending a lot of time managing that anxiety. “My major concern, when all this started, was the workforce. [So far] nobody’s walking around with their head hung low,” said Maj. Gen. Michael Terry, chief of Tank-Automotive Command (TACOM), in a sidebar with Breaking Defense at the AUSA conference. “Every time something new has come out we’ve shared it with the workforce,” he said, “I’ve had town hall meetings. I’ve had leadership meetings to include the union representatives.”

“It’s a kick in the gut, but it’s not like we’re shutting down completely,” Lt. Gen. Raymond Mason, the Army’s deputy chief of staff for logistics (G-4), told Breaking Defense at the conference. “I don’t mean to minimize it, because it’s a big deal, and it’s money out of those people’s pockets, and it’s an impact on day to day readiness.”

Military Personnel: Readiness and Morale

So far, despite the anxiety among civilian workers, Army leaders say the morale of their uniformed personnel is holding up. “You talk to young soldiers in units, they’re okay,” Lt. Gen. Mason told Breaking Defense. “Frankly they don’t live inside the Beltway, [though] they kind of know that stuff’s out there.”

(Compare and contrast Pentagon acquisition chief Frank Kendall’s comments that some troops in Afghanistan told him they were worried they would be furloughed alongside their civilian colleagues).

“People view the crisis for the remainder of ’13 as something we’re going to have to work through, and we’re going to preserve capabilities,” TRADOC chief Gen. Cone told Breaking Defense after his speech to the AUSA conference.

Even though realistic combat training will be cut back, Cone argued, there are “lower-cost kinds of things we can do, make-up things,” giving troops not headed for Afghanistan refresher courses on Army basics — maintenance, supply management, record-keeping, career counseling — that were shortchanged in the last decade’s overwhelming focus on counterinsurgency training.

“When the train slows down a bit, we can do some housekeeping,” Cone said.

But hard-charging combat troops will only be content with such housekeeping for so long, Cone went on. It’s in 2014 and beyond that he worries about an “exodus” of frustrated soldiers if the training dollars don’t come back. “The key will be as we look at ’14-’18 period, and scaling the things and investing in the right things so that we can continue training, resume training,” he said. “Whatever force we keep, we have a moral responsibility to make sure it’s well trained.”

Whether under the sequester or some kind of alternative cost-cutting deal, it’s clear the Army is going to get smaller, and get smaller faster, than its original plan of drawing down to 490,000 active-duty soldiers by 2017. The trick will be getting both the funds and the flexibility to keep that shrinking force both trained and motivated.

“I lived through the lean years of the ’90s, we got through it,” Mason told Breaking Defense, “but this moment in time is unique and frankly pretty scary.”